Winning has a price for Yankees' owner - Business - International Herald Tribune

NEW YORK — It's another summer evening in baseball and the Boston Red Sox are visiting New York for the latest showdown with their archenemy, the Yankees.

Few in the stands notice that the man perhaps most responsible for the revival of their rivalry is not there. George Steinbrenner, the principal owner of the Yankees and the man New Yorkers love to hate, now watches more games at his home in Tampa, Florida, than he does in his private box above home plate.

Although he is 76 and noticeably slower than he was when he took over the Yankees 33 years ago, Steinbrenner remains, those who know and work with him say, deeply involved in the Yankees operation.

Despite rumors that failing health has shrunk his ambition, the Boss, as he is known, is pushing all of his employees to try to win championships - and spending hundreds of millions of dollars a year to accomplish it.

Bankers, analysts and others familiar with the team's finances say the franchise is now worth about $1 billion, nearly 70 percent more than the next most valuable team, the Red Sox, and nearly three times more than the average major league team is worth.

Making the most of a winning tradition and their home in the biggest U.S. city and media market, the Yankees generate nearly $300 million in annual revenue, said an individual with knowledge of the team's finances.

But as Steinbrenner's stewardship of America's most-fabled baseball franchise stretches into its fourth decade, his win-at-all-costs business model appears under stress. Yes, the Yankees earn the most money, but, with the highest payroll in baseball, $195 million, analysts say they also spend the most, giving the team razor-thin profit margins.

The Yankees offer such a pre-eminent model for how to milk money from a sports team that its well-being has become a proxy for the financial prospects - and limitations - of professional baseball as a whole.

The Yankees' haul is produced by its share of the No. 1-ranked regional sports network, YES, as well as the more than 4 million fans each season who pay top dollar for tickets, parking and food.

The Yankees also get some of the highest licensing and advertising fees in Major League Baseball.

To keep up with the escalating prices that the team pays its players, the Yankees need still more revenue. Yet they have extracted about as much as they can from Yankee Stadium, an 83-year- old shrine that now suffers from a dearth of luxury boxes, parking and retail outlets.

Set for a 2009 debut adjacent to the current ballpark, a new stadium, including building costs and debt payments, will carry a $1 billion price tag. To pay for it, the Yankees will need to generate an additional $50 million to $60 million a year in revenue, analysts say.

Randy Levine, the team's president, declined to discuss how much money the team expected to earn in its new digs, though he ruled out selling the naming rights to the stadium.

Other baseball executives and analysts, though, question whether the stadium will be as much of a bonanza as the team may hope. The Yankees already sell out most of their seats and suites, they say, and the new stadium will have several thousand fewer seats.

To offset that loss, the Yankees plan to have 60 suites in the new stadium, three times as many as they offer now. If the stadium does not create a financial windfall for the Yankees, it is likely to cast a financial pall over other teams that are chasing dollars with the same urgency that they chase titles.

"The Yankees have created tremendous expectations and have created the need to continue spending," said Henry Fetter, the author of "Taking On the Yankees: Winning and Losing in the Business of Baseball."

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When he took over the team in 1973, Steinbrenner promised to take a back seat, leaving the running of the team to others. But he quickly did an about-face, bringing in his own people to run things, involving himself in every aspect of the club's operations and alienating employees, players and fans.

In 2002, an investment group that included the Yankees formed the YES Network, further leveraging the team's brand. YES brought in $257 million last year, becoming the country's top regional sports network for the first time, according to Kagan Research.

"It's not just attendance any more," said Tracy Dolgin, the chief executive of YES. "The better you do as a franchise, a cycle develops. When you're winning, there's interest in the team and your ratings are higher. Then attendance increases, you sell more food, more parking. It's an upward spiral."

The team has also signed big licensing deals with sponsors like Adidas and formed partnerships overseas, including one with the Japanese newspaper, Yomiuri Shimbun, many of whose readers follow every move of Hideki Matsui, the Yankee left fielder.

All of these economics, however, may be running into a wall, some sports executives say, and the Yankees' new stadium may not provide the revenue gusher that Steinbrenner and his executives expect.

The YES Network already reaps the highest fees of any regional sports network from cable companies, and those companies are likely to resist paying even more.

"The status quo on the revenue side is well established," said one former executive who has direct knowledge of the Yankees' finances and was granted anonymity because of his contractual obligations to the team. "George is getting every nickel he can."

The Yankees will be able to deduct some of the costs of building and operating the new stadium from their contributions to other teams under the league's revenue-sharing agreement.

Also, the city and state governments will build a parking lot at the stadium.

An environmental impact statement compiled by the New York City Department of Parks and Recreation projects that the average ticket price in the new stadium will be $57, as opposed to $45 in the old stadium. And analysts expect the Yankees to be able to charge a hefty premium for advertising in the new ballpark.

Other teams need the Yankees to succeed because the team contributes so much to the league's revenue-sharing plan.

"While they curse Steinbrenner under their breath, the other owners are happy to take his money through revenue sharing," said Maury Brown of the Society for American Baseball Research.

But the owners will not have Steinbrenner to kick around forever.

Questions about Steinbrenner's health took on a new urgency in 2003, when he fainted after a memorial service. And when Steinbrenner stumbled while coming down the stairs after one recent Yankee home game, every New York newspaper took note.

His malapropisms and off-color remarks are now viewed as a window into his health.

But those who deal with Steinbrenner say he is as involved as ever.

"People are taking a larger role, but there's no doubt who the boss is," said David Boies, whose law firm, Boies, Schiller & Flexner, represents the Yankees. "It's still George's team and George's business."